Japan's PM Kan Wins Party Vote, Pushing Yen to 15-Year High

Japan's PM
Japan's PM

Japan's Prime Minister, Naoto Kan, won a party leadership vote on Tuesday to secure his position as the country's premier, defeating challenger Ichiro Ozawa and fueling further gains in the yen.

Unlike Ozawa, who would have considered more debt if the economy worsened to fund more stimulus, Kan, 63, has promised to curb spending and cap borrowing to rein in huge public debt -- twice the size of Japan's $5 trillion economy. He also advocates raising the 5% sales tax to fund the growing social welfare costs of a fast-aging population, Reuters reported.

Kan, who has been at Japan's helm for about three months, is the nation's fifth prime minister in less than four years. His victory means that Japan will be spared yet another leadership change.

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Kan, who already has to deal with a fragile recovery and a huge public debt, has expressed concern about the rising yen, which climbed to 15-year highs against the dollar, but so far hasn't taken action to curb the currency's gains. A strong yen is seen as undermining Japan's recovery, as it makes exports less competitive overseas.

But since Ozawa was considered more likely to take action to combat the strength of the yen, as the BBC reports, traders immediately drove it higher. The U.S. dollar fell from ¥83.60 before the results of the party election were announced to as low as ¥83.07, with the yen hitting a fresh 15-year high. The dollar later recouped some of its losses to trade at ¥83.40.